Welcome to the November edition of "In the Know", Baker McKenzie's leveraged finance newsletter that analyses significant trends and salient legal issues for participants in leveraged finance and high-yield markets around the globe.

Lenders and their legal advisers carefully check the capacity of obligors and the due authorisation of their signatories when a deal commences. In this edition, we consider the issues arising when consent is needed from obligors during the life of a facility. The recent English case of CRF I Ltd v. Banco Nacional de Cuba and another [2023] EWHC 774 (Comm) is a cautionary reminder of the consequences of failing to obtain obligors' approval going forward.

*A version of this article first appeared in the October 2023 issue of "Butterworths Journal of International Banking and Financial Law".

Key takeaways

  • An obligor's capacity and authority to give consent is a matter for the law of such obligor's jurisdiction of incorporation.
  • The giving of requisite consent is relevant not only at the outset of a transaction but may also be necessary to ensure the smooth operation of the facility throughout a transaction.
  • Where prior obligor consent is required to transfer a loan participation, contemporaneous evidence as to capacity and authority should be provided.
  • Contractual conditions to assignments or transfers should be strictly complied with to ensure that an effective transfer of legal title occurs.

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